Should French spreads be compared to Italy 2011?
TLT•France’s government bond spread over Germany was last at 156 basis points after reaching 177.70 basis points last week. BCA Research economist Jeremie Peloso said the spread could rise to 300-350 basis points, while arguing that comparisons with the 2011 euro zone crisis have limits.
1. French debt spreads
The rise in France’s debt risk premium has raised concern about fiscal sustainability in the euro zone and possible effects on bonds and stocks. The French-German government bond yield spread was last at 156 basis points, after reaching 177.70 basis points last week.
2. Comparison with 2011
BCA Research economist Jeremie Peloso said comparisons with 2011 are not directly relevant because France was not the problem then. French spreads exceeded 180 basis points for three sessions in November 2011 and briefly reached 202 basis points, while Italian and Spanish spreads reached 500 basis points. Peloso said he would not be surprised if the French spread reached 300-350 basis points, and said he would not buy until then.
